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Real Estate Agents & Educators Agree: Fee-For-Services to Accelerate in Next Five Years

mo·men·tum/mōˈmentəm/Noun

1. The quantity of motion of a moving body, measured as a product of its mass and velocity.

2. The impetus gained by a moving object.

Comes from Latin, “moment”---now

It’s here---palpable momentum in fees-for-services for real estate professionals, allowing consumers to select the services they need and pay what they’re worth. As evidenced in the 2011 Inman Compensation Survey, over 1,000 brokers and agents were polled with the question, “What type (or types) of fee structures for real estate services do you believe will become popular within the next 5 years?” A whopping 36% of respondents believed that real estate professionals will be paid fees-for-services compared to percentage commissions that will occur only 43% of the time.

And the momentum continues. At the international Real Estate Educators’ 2011 conference held last month in Las Vegas, a similar question was raised in a real estate trends forum where attendees voted electronically using a hand-held device: The question posed, “Do you agree with the Inman 2011 Compensation survey, that fee-for-services real estate compensation could become 36% or more of the marketplace in the next five years?” An overwhelming 62% of the nearly 200 real estate educators in attendance voted “yes, fees-for-services could become 36% or more of the marketplace by 2016.”

What’s causing this new-found momentum in the real estate profession? In part, to paraphrase the snowclone made popular by Clinton campaign strategist James Carville, ”it’s the economy, ____.” Equity is drying up at the speed of light, causing agents to look elsewhere for professional compensation and re-think the one-hundred year old traditional business model. This is compounded by the sheer volume of short sales and foreclosures, putting control of what equity remains, in the hands of lenders and other third-party companies. If real estate sellers don’t have equity, professionals will need to either do more pro bono work (not that they don’t do enough already!) or embrace new ways to be compensated like other types of professionals…with fees for services rendered.

But the momentum is also being churned by consumers who are sick and tired of not having stronger control of the real estate process, the services they receive, and how they pay for them. And if the real estate meltdown taught them anything, it’s to be more vigilant about what they buy, how much they pay, and whom they work with. Cost-effective homeownership is the new mantra of the reinvented consumer; and what and how they pay for professional services is a huge part of that equation.

It will be interesting to see just how accurately the projections play out in the next few years. But the facts are clear. Momentum is occurring. And with it, the need to think outside of the box, provide consumers with a more transparent process, and embrace this “moment” and momentum for true change.

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Commission-ectomy Coming Your Way? The Statistics Are Frightening!

Well, the verdict is in....eroding real estate equity is having a huge impact on how real estate professionals get paid...and the statistics are frightening! It's estimated that 70% of homeowners have a mortgage; and today, the aggregated loan-to-value ratio on those mortgages is a whopping 88.4% on the average----that means that the typical mortgaged homeowner has less than 13% equity in the property! (And, for states hard-hit like Florida and Nevada, that percentage could be on the high side).

So what happens if they attempt to sell using the traditional percentage commission structure? After commission and closing costs, they might be lucky to net 2% on the sale---that's a paltry $4,000 on a $200,000 home. And with so little cash available, the seller might be tempted to look to the professional assisting him, (who stands to pocket more than he does), and request that she take a "commission-ectomy"...that's a little lower than an appendectomy, but it hurts a whole lot more!

The handwriting is on the wall. Our 100-year- old real estate business model is on life support----and the word on the street is it can't be resuscitated. In fact, the-one-size-fits-all model never did, it's no longer profitable, nor is it transparent or flexible enough to satisfy the growing needs of today's savvy consumer.

Unless and until we ramp up new business-model approaches, we will continue to lag behind in compensation and professionalism. We need to scrap "FREE" and add "FEES"! We need to drop the "salesperson" mantle and replace it with being a results-focused, trusted-advisor-for-life. It means unbundling some real estate services and offering them a la carte, charging the consumer for what he or she needs.

As real estate professionals, it's time to man and woman up and get the guts to reinvent ourselves and admit that there are other ways to do business?.and perhaps, even more streamlined and profitable ones. Absent new approaches, we're already out of business; we just don't know it yet! .

Real Estate Consumer' Evolution, REvolution

Definition: A revolution (from the Latinrevolutio, "a turn around") is a fundamental change in power or organizational structures that takes place in a relatively short period of time.

The REvolution is upon us. Real estate consumers are disillusioned, battle-weary and discouraged after the events of the past several years. Their equity has eroded, the costs of owning a home have skyrocketed, mortgages are tougher to get and keep current; and (this is a biggie!) they no longer have the equity to pay percentage fees if they do want to sell their home! What was often seen as a financial inconvenience for consumers in the past is now an impossibility for many!

Eerily fitting the definition in this post-real estate-meltdown, Americans' are ramping up a real estate consumer REvolution...And, in a relatively short period of time, consumers are demanding a turn-around in real estate services, approaches, and getting their needs met. This fundamental change in power puts them in the driver's seat, and they intend to stay there. And when it comes to organizational structure, they've seen that the old way of accessing real estate services and the banal, tedious system of the listing/selling process no longer cuts it. They demand a new, transparent way to navigate real estate services and they'll gravitate to the most expeditious, streamlined, and cost-effective way to get. That's why it's never been a better time for traditional real estate agents to reinvent themselves as real estate consultants and unbundle their services and talents!

It's time for real estate professionals to stage their own REvolution---scrapping the role of "solely a salesperson" to a more consumer-centric trusted advisor who applies his/her unique skill sets to build a true client for life---making it a win/win for consumers and the profession.